CAMBRIDGE, Mass.--SolarCity is a cross between a solar installer and software company, which will give the company an edge as solar leases become commonplace, according to CEO Lyndon Rive.

The San Francisco-based start-up is one of the pioneers in offering financing for residential solar power, which eliminates the hefty upfront cost of photovoltaic panels. The model has served SolarCity well, which has grown rapidly in the past three years and could go public within two years, Rive said.

Lyndon Rive, CEO SolarCity
SolarCity

Consumers can lease panels from SolarCity, which owns and maintains them for 20 years. Through the arrangement, customers' monthly electricity bills go down by about 10 percent to 15 percent, according to Rive, who was at the EmTech conference at the Massachusetts Institute of Technology on Thursday.

But eventually, offering some sort of financing, either through a lease or a power purchase agreement, will become a commodity, he said. Indeed, more and more solar installers are offering financing to homeowners interested in solar, but unable to invest $25,000 to $40,000 upfront for a full system.

To stay ahead of others, SolarCity has developed a software system which could be called customer relationship management (CRM) for solar. It smoothes out the process of delivering a bid to consumers, handling permits and incentives, and designing installation.

"Our differentiator has never been our lease. It's the entire customer experience," said Rive, who cofounded the company with his brother Peter after working at a software company. "As the economy and the financial markets stabilize, financing will be a commodity."

Rather than the installer bringing in a third-party financing company, SolarCity can offer a full offering, sort of like how Apple offers an end-to-end offering, Rive said.

As for going public, Rive said the company is cash-flow positive now although shrinking state incentives for solar power do make it harder to lower customers' bills through a lease. SolarCity now offers installation services in five states and is looking to expand in the Northeast next.

An IPO "is not my exit. That's my start. I have to deliver solar to millions of homes," he said.

Using storage to firm solar on the grid
In addition to seeking to expand nationally, SolarCity is involved in two projects that are on the cutting edge of solar technology.

A 2.8 kilowatt system installed by SolarCity in Beaverton, Ore.
SolarCity

Right now, utilities can't count on distributed solar panels as a power source as they would a power generation plant because there are variations in weather. With the battery program, SolarCity will develop a system to aggregate power from solar panel-charged batteries so that grid operators can plan on their contribution. The battery packs will be supplied by electric-vehicle maker Tesla Motors.

In Hawaii, large numbers of distributed solar panels risk causing instability in the grid by providing more power than the grid can use, Rive said. In Maui, there's been a halt to solar installations so the local utility can better understand the impact, he said.

"Over the next two or three years, it will become more of a problem (in California) but we have to figure out how to reduce the cost of the batteries," he said.

Price competition between traditional polycrystalline silicon and thin-film panels is going to be brutal in the years ahead, Rive said. "It's going to be a battle. It's going to be a bloodbath," he said.